ME CMT firms fare well on shareholder index

Dubai, February 3, 2009

While 2008 was a horrible year for most communications, technology and media (CMT) firms worldwide, many Middle East and Africa players – including Etisalat and Orascom,– have demonstrated above average performance in Oliver Wyman’s Shareholder Performance Index (SPI).

Among all regions, the Middle East and Africa, along with Latin America, posted the highest SPI – both with a regional average of 203, almost twice the CMT total average of 107, said an official spokesman.

The calculation of the SPI, which is based on a five-year moving “window” of data, enables consistent comparison of shareholder returns by adjusting for the volatility of returns, differences in local interest rates, and mergers and acquisitions.

CMT firms around the globe collectively shed $3.1 trillion in market value in 2008, a 43 per cent drop from $7.3 trillion to $4.2 trillion - erasing all the gains that had been made since 2003, according to Oliver Wyman’s second annual Communications, Media and Technology State of the Industry 2009 report.

The report analyses the top publicly quoted 450 companies worldwide in the CMT industries, and highlights several forward-looking and dynamic, long-term trends amongst industries in the Middle East.

“A handful of companies were able to navigate the rough economic waters and post outstanding performance in Oliver Wyman’s SPI,” said Dubai-based partner of Oliver Wyman Milan Sallaba.

“Mobile carriers in particular, are clearly gaining value at an exponential rate, and one prime example of the shift is the emergence of telecom powerhouses in the Middle East and Africa.

“Our research shows that some consumer segments in this region are leapfrogging regular mobile phones in favor of smartphones, and here subscriptions on a 3G network now account for half of total mobile subscriptions.”

Sallaba added that Internet access via computers also contributed to the wireless Internet growth and the growth rate of laptop sales in the Middle East and Africa is now 10 times higher than for traditional PCs.

The report also highlighted that although there is still ample room for growth in emerging markets, many of the remaining unserved customers live in remote, rural regions that are difficult and expensive to reach.

Thus, smart players are beginning to look for second generation value-creation opportunities, such as differentiated products and services for increasingly sophisticated consumers, services and support for business customers, reverse expansion into new markets, both close to home and in the developed world.

“We’ve seen many emerging-market players who have honed their offerings to appeal to low-income consumers, and they may prove very competitive with today’s frugal consumers. Once they’ve established a position, they might be able to adjust their offerings to attract high-end consumers as well,” added Sallaba.

Kuwaiti telecoms firm Zain is highlighted in the report as an example of operation excellence, demonstrating how customer-centric product offerings can increase sales and revenues in a saturated market.

Zain, which since 2003 has expanded and grown from a single operation in Kuwait to 22 countries across the Middle East and Africa, now serves close to 60 million customers.

While the Kuwaiti operation today contributes just three per cent of overall subscribers, it generates about 20 per cent of group revenues and 50 per cent of net profits (as of the first half of 2008). As a result, Kuwait remains a key asset in the portfolio, and Zain actively seeks to defend its position in that market.

Another emerging-market player that has moved into developed markets is Egypt-based mobile networks operator Orascom Telecom Holding (OTH). After successfully expanding in the Middle East, Africa, and South Asia, Orascom acquired enough strength and experience to acquire operations in Italy and Greece,<